Government to consider opening Capacity Market to renewables

The review by the Business, Energy and Industrial Strategy (BEIS) department, states that ministers will consider whether subsidy-free solar and wind power should be allowed to participate in the next Capacity Market auction, which is set to take place in the winter of 2019-2020.

Renewables have historically been denied access to the market due to concerns about the intermittent nature of the electricity they generate. Energy storage is viewed as a solution to these issues, but the technology is still in its infancy.

But the review’s call for evidence document states that there are now “good reasons to allow wind and potentially solar” to participate in the Capacity Market, and that such a move could “increase competition, auction liquidity and value for money for consumers”.

The document explains that wind and solar generation have previously been excluded from Capacity Market auctions as it was expected that the technologies would already benefit from low-carbon support schemes such as Contracts for Difference (CfD) or the Renewables Obligation (RO).

However, following a plethora of cuts to subsidies and feed-in-tariffs (FITs), combined with the closure of Renewables Obligation (RO) applications last year, the document explains that the Capacity Market’s eligibility framework may need to be amended to encompass subsidy-free renewables.

Legislative changes may also need to be made to enable hybrid technologies to access to the Capacity Market. Renewable projects combined with energy storage were noted as examples by the call for evidence.

The document additionally reveals that ministers will consider ceasing the de-rating of interconnectors – a process which measures how reliable each technology is. The consideration is being undertaken due to concerns that nations may experience correlated fluctuations in output as the energy system becomes more reliant on renewables.

The document concludes that the Capacity Market, which was introduced in 2014 to provide an insurance policy against the possibility of future blackouts over periods of heavy demand on the UK grid, is “broadly working as intended” without renewables.

Market change

The publication of the review was welcomed by the Renewable Energy Association’s (REA) policy manager Frank Gordon, who praised ministers for considering moves away from providing the majority of available financial support to fossil fuel-based generation.

“As we have consistently said, the problem with the Capacity Market is that it fails to tackle all elements of the ‘Energy Trilemma’ – completely ignoring both value for money and decarbonisation – unlike the remaining renewable support schemes which tackle all elements,” Gordon said.

“We encourage the government to examine how renewables can be included in future auction rounds as soon as possible, as well as to address the current barriers that make it more difficult for energy storage projects to compete.”

Sarah George